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The Many Rooms of the Business Analytics Mansion

by Gary Cokins, Consultant, www.sas.comWednesday, January 29, 2014

An organization’s analytics-based enterprise performance management mansion has many rooms.

Business schools tend to divide their curriculum between hard quantitative-oriented courses, such as operations management and finance, and soft behavioral courses, such as change management, ethics and leadership. The former relies on a run-it-by-the-numbers management approach. The latter recognizes that people and human behavior play a substantial role. This separation of the curriculum is like the rooms in a palatial mansion.

In one set of rooms are managers who apply the quantitative approach of Newtonian mechanical thinking. They see the world and everything in it as a big machine. They want the levers, gears and pulleys to manage the organization. This approach speaks in terms of production, power, navigation, efficiency and control, where (as an exaggeration) employees are hired to be used and periodically replaced, somewhat as if they were disposable robots.

In contrast, in another set of chambers are managers who apply the behavioral approach. They view an organization as a living organism that is ever-changing and adjusting to its environment in a sense-and-respond way. This Darwinian way of thinking speaks in terms of evolution, continuous learning, natural responding and adapting to changing conditions. This concept is explored in the book by Stephan H. Haeckel called “Adaptive Enterprise: Creating and Leading Sense and Respond Organizations.”

Different Rooms for Different Functions

Regardless of the use of the Newtonian or Darwinian managerial style, specific rooms in the mansion are dedicated to functions such as developing new products, marketing to acquire new customers, or fulfilling customer orders by timely delivering high quality products and services. We often refer to these functional rooms as organizational silos. Sub-optimization typically exists between and among the rooms. Managers operate their rooms to their own liking. In the old days, each room had its own fireplace, so the room’s comfort level was individually controlled. When the mansion was refitted with central heating and air conditioning, the managers were increasingly forced to compromise and reach agreement about trade-off issues. Most managers were not happy with the new arrangement.

In today’s organization mansion, there is an increasing need to understand how one room affects another room. For example, managers in a manufacturer’s production room have grown to like a minimalist décor with low inventory clutter so that they can quickly assemble parts in reaction to widely varying tastes and delivery due dates of customers. In a neighboring room, sales managers like tall stacks of inventoried products so that they never miss a sales opportunity due to a product shortage. A growing problem in the mansion is that these managers’ methods increasingly impact each other. Any conflict adversely affects the enterprise’s performance – in both customer satisfaction and financial results.

Teamwork and collaboration is the ideal way to live in the organization mansion. But despite all the encouragement from scholars and media, good teamwork is tricky to attain. Success comes only to those teams of people who place their own self-serving interests below the more important needs of their organization. The mansion is more important than its rooms. The use of analytics enhances teamwork. It shifts from making decisions based on intuition and gut feel to facts and insights and foresight derived from having facts.

As Patrick Lencioni describes in his book “The Five Dysfunctions of a Team,” one problem in team behavior cascades into other problems that collectively escalate to degrade any organization’s performance. For example, when different managers secretly tamper with the mansion’s central thermostat, they are exhibiting behavior that fosters an absence of trust in each other. Rather than confront one another, managers typically avoid conflict. Instead of debating what will work best for everyone, they resort to secret discussions with a few other “room” managers. Once someone asserts authority and resets the thermostat, the adverse consequence is a lack of commitment to it by others because no one cared enough to listen to their opinions.

The breakdown in teamwork then gets worse. Because of the resulting lack of commitment and buy-in to the choices decided by others, room managers avoid accepting accountability for the conditions (i.e., the performance) of their own rooms. They begin locally adjusting things to offset what they don’t like, and they pay less attention to the mansion as a whole. They revert to putting their individual needs above the collective goals of the team; in the terms of a balanced scorecard, the goals are the strategic objective “boxes” in a strategy map. Consequently, the enterprise’s performance does not improve and may possibly decline.

The Performance Management Chambers

My belief is there are some rooms, perhaps just closets, where managers see usefulness in blending the characteristics of the Newtonian and Darwinian styles. They also believe in teamwork and collaboration. The challenge to the executive team is to integrate and balance the quantitative and behavioral approaches. The aim is to foster behavior as a team, not as rivals. The managers of the closet rooms understand the full vision of analytics-based enterprise performance management to be the seamless integration of multiple managerial methods – such as customer relationship management, strategy execution, driver-base rolling financial forecasts, and lean/Six Sigma quality management techniques.

Command-and-control style managers, who prefer to leverage their workers’ muscles but not their brains, run into trouble. Ultimately, things get done through people, not via computers or machines, which are simply conduits for arriving at results. Most employees are not thrilled by being micro-managed. The good performers are people and teams who are allowed to manage themselves and positively collaborate with others, as long as they are provided some direction and timely feedback. Management creates value by setting and communicating the strategic direction they want to go, and they produce results by leveraging people who focus on projects and process improvements for how to get there. The underutilized capability of employees and partners may arguably be the most wasted asset of an organization.

In an analytics-based enterprise performance management mansion, each chamber is furnished strategy maps that set the direction from the executive team. Each room is further provided information and analysis tools, heavy with predictive analytics, so its people can determine the best ways to achieve the executive team’s strategy. A balanced scorecard’s KPIs and operational dashboard’s performance metrics are displayed in each room for feedback so that everyone knows how they are doing on what is important. The mansion has a single enterprise-wide information platform rather than many disparate out-of-sync data sources. People are empowered to quickly make decisions because they increasingly lack time to seek answers and approvals from higher-level executives. By behaving as a cohesive team and collectively collaborating, managers in this mansion don’t just manage performance – they improve performance.

A highly effective analytics-based enterprise performance management mansion has many rooms, but its managers produce exceptionally superior results because they are all on the same team.

About the author

Gary Cokins (Cornell University BS IE/OR, 1971; Northwestern University Kellogg MBA 1974) is an internationally recognized expert, speaker, and book author in business analytics and enterprise performance management systems. He is the founder of Analytics-Based Performance Management LLC, an advisory firm located www.garycokins.com. He began his career in industry with a Fortune 100 company in CFO and operations roles. He then worked 15 years in consulting with Deloitte, KPMG, EDS, and SAS. He has authored several books, and continues to write articles and blogs on EPM, managerial accounting including activity-based costing (ABC), and business analytics. His next book is “Predictive Business Analytics” due out in October 2013, published by John Wiley & Sons.

Originally posted on Information Management

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